Isaac Newton and Bitcoin

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Jack Welch was CEO of GE for 20 years. In a changing world, is he still the model for leadership?[/caption] When discussing the challenges facing business leaders it seems almost de rigeur nowadays to talk about the level of change organisations are facing. The challenge to equip leaders to build the future in these uncertain times is certainly daunting, with seismic geopolitical shifts (in this context the Trump administration seems to be the gift that keeps on giving), disruptive technological change (how many of us even fully understand the implications of bitcoin, blockchain and whatever new technology will be unleashed on us next) and even severe climate and weather events. The very ubiquitous nature of these challenges may however inure us to their real potential as both a threat and an opportunity to affect a true paradigm shift in how we view leadership, a classic case of an issue being undervalued through overuse. . The Concept of Leadership From the perspective of the 21^st century the development of our concept of leadership is a little clearer than it may have been in the past. From this remove we can see how the largely male, heroic models of leadership have greatly influenced the literature and teaching in this field. The business leaders who are most often cited, Jack Welch, Steve Jobs etc. are broadly from a similar mould and the models of leadership, with the exception of Servant Leadership (as a servant leader you put the needs of others, particularly team members, before you even consider your own, but how many executives really model themselves on this type of leadership?) extol an assertive, confident, out-going and mainly extroverted style. In fact, the Myers Briggs type most associated with leadership is the ENTJ (extraversion, intuition, thinking, judgment), which is described as the ‘general’, again exposing the military underpinnings of the leadership canon. We can clearly see this bias in the continuing popularity of books like Dale Carnegie’s “How to win friends and influence people”, the pseudoscience of NLP and programmes that teach executives how to create the right ‘impression’. Given the genesis of the leadership concept it is understandable that people might misconstrue the notion of leadership presence as the ability to impose oneself (and influence people), but there is real hope that we are about to experience a genuine shift in the paradigm. . Unhappy Influencers [caption id="attachment_22617" align="aligncenter" width="600"]

Richard Boyatzis studied how leaders influence those around them and how that effected their lives and careers[/caption] . Recent research conducted by Richard Boyatzis and colleagues from Case Western Reserve University examined the relationship between the extent to which people adopted an ‘influencing’ leadership style and their later satisfaction with both their careers and their life in general. Interestingly they found a very strong negative correlation between these factors, i.e. the more people adopted an influence style the less satisfied they were with their careers and lives. Boyatzis and colleagues did not have an objective measure of career success, so one could still argue that the ‘influencers’ did better in their careers, but Boyatzis’ research does tell us that irrespective on how well an outsider might judge your career progress, the ‘influencers’ are less happy about their situation. The researchers concluded that those who adopt an influencing style are pushing on their environment and trying to get more from others, e.g. they tend to show a high need to control social situations. The crux of the problem, especially in the context of a VUCA world, is that pushing on or trying to control an environment that is in a constant state of flux, verging on chaos is unlikely to be very effective and will certainly lead to people being highly dissatisfied and unhappy in their work and indeed their lives. Now would be the perfect time for the leadership movement to learn the lessons of evolutionary psychology that success in a changing environment falls to the most adaptable, those who can outlearn their competition. The Adaptable Generation This will require a cadre of new leaders who are less ego-identified with success and winning, who don’t see problems as opportunities to impose themselves and demonstrate mastery of the environment. Rather we will see the emergence of leaders who can go with the flow, adapt to new realities quickly, work through and with others as either leader or follower and pivot gracefully as cherished paradigms fall away and hard-earned experience proves ineffective as a guide to new problems. There is no doubt that the idea of women in leadership is in the current zeitgeist and may or may not create a fundamental shift in how we see leadership in the future. I am however hopeful, that as the new model emerges we will see less emphasis on the old machismo of the ability to impose oneself on others and on the environment and more emphasis on the willingness to adapt, change and ‘flow’ with emerging realities. Bruce Lee used to tell his students to ‘be like water’, perhaps that is not a bad metaphor for what leaders will need to become. Dr Colm Foster is Director of Executive Education at the Irish Management Institute. He has acted as a leadership development consultant to organisations in the US, Asia and Ireland, particularly specialising in Emotional Intelligence. The next IMI Diploma in Leadership starts on 2nd May, 2018. [post_title] => 21st Century Leadership: The Shifting River [post_excerpt] => [post_status] => publish [comment_status] => open [ping_status] => open [post_password] => [post_name] => 21st-century-leadership-shifting-river [to_ping] => [pinged] => [post_modified] => 2020-05-09 13:19:26 [post_modified_gmt] => 2020-05-09 13:19:26 [post_content_filtered] => [post_parent] => 0 [guid] => https://www.imi.ie/?p=22610 [menu_order] => 0 [post_type] => post [post_mime_type] => [comment_count] => 0 [filter] => raw ) [1] => WP_Post Object ( [ID] => 14214 [post_author] => 55 [post_date] => 2016-04-07 10:45:50 [post_date_gmt] => 2016-04-07 10:45:50 [post_content] =>

Blockchain is rapidly emerging as the next multi-billion euro digital technology market.

Digitally Generated Image of Online Security Concept

Source: www.forbes.com

It is estimated that spending by organisations on Blockchain projects will exceed $1bn in 2017, which will make it one of the fastest developing digital technologies of all time.

It is receiving much attention due to its potential to disrupt and transform industry sectors. Blockchain has implications for multiple industry sectors including technology, financial services and healthcare. In financial services, institutions such as the Bank of England, Citibank, State Street and the NASDAQ are exploring its business potential. In healthcare, Blockchain technology has the potential to address issues regarding access, security, scalability and privacy of electronic medical records as well as enabling extensive healthcare research. Over the last few months, there have been a number of notable Blockchain “Proof of Concept” initiatives. For example, on New Year’s Eve, NASDAQ enabled the first-ever private securities issuance on their new Blockchain technology platform, Nasdaq Linq. It is purported that Blockchain holds the potential for 99% reduced settlement time and risk exposure in capital markets. Yet, among the broader business community, there remains a lack of understanding of the fundamental concepts of Blockchain, an issue which needs to be addressed if organisations are to benefit from its disruptive capabilities and develop transformative use cases.

Definition

Blockchain is a distributed ledger - a continuously growing list of records that are hardened against tampering and revision. Fundamentally, Blockchain can be seen as a peer-to-peer infrastructure where nodes in the network coordinate to play a vital role in processing transactions. Bitcoin is the most widely known application which operates on Blockchain, with the technology being used as the public ledger of transactions for cryptocurrencies. However, it is in domains beyond cryptocurrencies that most disruptive and transformative use cases are emerging.

Architecture

A Blockchain implementation consists of two parts: 1) Transactions 2) Blocks 1. Transactions: the actual data to be stored in the Blockchain. Participants create a transaction using the system (When someone initiates sending of cryptocurrency to another person for example). 2. Blocks: Blocks are records that confirm when and in what sequence certain transactions became journaled as a part of the Blockchain ledger. These blocks are created by parties known as "miners" who use software designed specifically to create blocks. There are two key players in the network that play a role in executing Blockchain events: (a) Miners: Masternodes that have the ability to create/process transactions (b) Name nodes: Nodes that have the ability to store data within a chain Miners create blocks that confirm and incorporate those transactions into the Blockchain. bbc

Source: www.bbc.co.uk

Blockchain: Characteristics and Advantages

1. Decentralisation: Transparency and Resilience Every node has a complete or partial copy of the Blockchain. This avoids the need to have a centralized database. This decentralised approach removes single point failure for transactions, potentially facilitating greater resilience and transparency. 2. Double spend solution: Trusted Third party not required Cryptocurrencies, for example, use various time stamping schemes such as proof-of-work, to avoid the need for a trusted third party to timestamp transactions added to the Blockchain. This avoids anyone easily double-spending the currency and the need for a third party intermediary to validate business transactions. This can serve to reduce transaction costs, realise significant cost savings while enhancing transparency. 3. Other advantages of Blockchain include:

The ability for a large number of nodes to converge on a single consensus of the most up-to-date version of a record.
The ability for any node that creates a transaction to, after a certain period of time, determine with a reasonable level of certainty whether the transaction is valid and became final (i.e. that there were no conflicting transactions confirmed elsewhere in the Blockchain that would make the transaction invalid, such as the same currency units: "double-spend").
An automated form of resolution that ensures that conflicting transactions (such as two or more attempts to spend the same balance in different places) never become part of the confirmed record set.

Business Innovation: The potential to disrupt and transform industries.

There are still many issues to be overcome before Blockchain is widely adopted. Issues pertaining to network design (permissioned vs permissionless), scalability and business models need to be addressed. There is no “one size fits all” solution.

What does this all mean for business? Opportunity!

In addition to the areas widely being discussed in relation to Blockchain, including payments (cryptocurrency), fraud (Everledger) and trading (NASDAQ), some other domains where Blockchain technology can be applied in driving business innovation include: 1. Auditing: With a single set of transparent records, Blockchain has the ability to fundamentally change auditing processes worldwide. 2. Insurance: A single set of transparent records, for example relating to building certification, fire safety, engineers reports etc. could potentially transform the insurance industry. 3. Business Records: A single set of searchable records pertaining to company directorships, asset ownership, property transactions and judgements has the potential to completely transform practices within the banking and legal professions. 4. Healthcare: Smart health systems, with functionality to include admittance and validation of patient’s identity. Other potential use cases could include a universal ledger for medical research.

Therefore, Blockchain presents numerous business opportunities for organisation’s to innovate, disrupt and transform industry sectors. However, they need to act now towards ensuring that they are leading the digital transformation within their sectors.

Dr. Philip O’Reilly is a Senior Lecturer at University College Cork and is the Programme Director for the MBS in Digital Business. Philip has delivered keynotes and workshops to numerous multinational companies and at leading practitioner events including the Banking & Payments Federation of Ireland National Conference. He recently received the Stafford Beer Medal in recognition of the most outstanding contribution to the philosophy, theory and practice of Information Systems (IS) from the Operational Research (OR) Society at an Awards Ceremony. _____________________________________ [post_title] => Blockchain: Digitally Disrupting and Transforming Business Ecosystems [post_excerpt] => [post_status] => publish [comment_status] => open [ping_status] => open [post_password] => [post_name] => blockchain-digitally-disrupting-transforming-business-ecosystems [to_ping] => [pinged] => [post_modified] => 2020-05-11 20:12:21 [post_modified_gmt] => 2020-05-11 20:12:21 [post_content_filtered] => [post_parent] => 0 [guid] => https://www.imi.ie/?p=14214 [menu_order] => 0 [post_type] => post [post_mime_type] => [comment_count] => 0 [filter] => raw ) [2] => WP_Post Object ( [ID] => 15658 [post_author] => 72 [post_date] => 2016-09-01 10:11:57 [post_date_gmt] => 2016-09-01 10:11:57 [post_content] =>

Economic growth expectations have been revised sharply downwards since the UK voted to exit the European Union. The asset manager Fulcrum has revised its 2017 British growth forecast down by 1.7% and for the eurozone down by 0.6% of GDP. Note that these are just 2017 forecasts. We are likely to see downward revisions in growth expectations for following years, too.

Source: cormaclucey.blogspot.ie

If the UK serves formal article 50 notice on the EU that it intends to exit by the end of this calendar year, we are unlikely to see the final contours of its future arrangements until late 2018 at the very earliest. And the EU trade commissioner Cecilia Malmstrom says Britain cannot begin negotiating trade terms with the bloc until after it has left. “First you exit, then you negotiate,” she told the BBC’s Newsnight. If the UK must wait for its divorce arrangements to be finalised before it can negotiate its new trade arrangements, it may be the middle of the next decade before the fog of uncertainty finally clears. At this stage, we are only in the foothills of danger, but we have perilous political mountains to traverse at a time when global economic storms are gathering. A fortnight ago, as he reclined in foothills pose, finance minister Michael Noonan sought to reassure voters that Brexit would not affect Ireland’s 2017 budget. Last week, in mountainous pose, he was forced to admit that the situation was “evolving” and was “hard to get a fix on”. The investment bank Morgan Stanley sees two possible scenarios for the UK’s conscious uncoupling from the EU. In the civilised divorce outcome, the relationship with the EU is progressively resolved, capping the negative hit to demand and keeping the British economy out of recession. In an acrimonious divorce scenario, “the sources of uncertainty interact with, and amplify, each other”. Unfortunately, there is no shortage of acute uncertainties and dangers afflicting the EU right now. Will the pragmatic Angela Merkel or the doctrinaire Jean-Claude Juncker control the EU negotiators? Will Merkel remain German chancellor after next autumn’s federal elections? Will the Italian banking system — and Italy’s membership of the euro — remain intact? Will a gigantic economic crash in China plunge the global economy into recession? The reality is that nobody knows for sure how Brexit will pan out. There are too many known unknowns never mind unknown unknowns. This uncertainty is already taking its economic toll. European private equity transactions — the purchase and sale of private companies — slowed dramatically between the second half of 2015 and the first half of this year. The total deal value almost halved from €48.5bn to €25.6bn according to the Centre for Management Buyout Research. “The market is cooling off, with the EU referendum one of a number of challenges currently facing deal-doers,” it noted. “There is evidence that some risks have begun to crystallise,” the Bank of England said in its latest financial stability report, published in London last Tuesday before concluding that the “current outlook for financial stability is challenging.” The bank then facilitated increased lending by cutting its capital requirements for UK banks and pledged to implement any other measures needed to shore up their financial stability following the Brexit decision. The Bank of England will do what it can to prevent the UK entering into recession. So will the British government, starting with chancellor George Osborne’s commitment to reduce corporation tax rate to 15% or lower. “What’s done is done,” Osborne stated. “The British public have spoken. We should accept their verdict instead of moping around or trying to unpick it. We must focus on the horizon and the journey ahead and make the most of the hand we’ve been dealt.” The challenge for Osborne and his successor is that, while a reduction in the corporation tax rate is likely to have a positive long-term effect, it may have only a limited effect in the short term when Britain most badly needs a policy boost. The problem for policy-makers is that the cupboard is pretty bare when it comes to the most conventional form of short-term economic boost: fiscal stimulus. The UK is only just getting its public finances back in order following the convulsion of the global financial crisis. But Osborne has now abandoned his target to get government finances back into balance by 2020. So if it has little or no room for manoeuvre on fiscal policy, how can Britain avoid a recession? It has two remaining policy levers. It can run a stimulative monetary policy. That would mean relaxing some bank regulations, keeping interest rates lower for longer and more aggressive quantitative easing, aka money printing. The Bank of England governor has already signalled his readiness to consider all this. The second policy lever that the UK has is its exchange rate. This will be heavily influenced by its monetary policy. Suppose, theoretically, that the Bank of England proposed to use quantitative easing to double the quantity of sterling issue. And suppose that markets expected the quantity of other currencies to remain fixed. Then, all other things being equal, we would expect sterling to halve in value against other currencies. This simple theoretical example shows why the suggestions that UK monetary policy might be eased further has coincided with a significant drop in sterling. Since the evening of the Brexit vote, it has dropped 10% against the euro and 12% against the dollar. I expect sterling to fall still further over the coming months. Allowing the pound to drop sharply against other currencies is a relatively low-cost way for Britain to adjust to weaker economic output and to its extremely large balance of payments of deficit, or excess of imports over exports. As the IMF recently commented: “The current account deficit has risen substantially in recent years, reaching 5.2% of GDP in 2015 . . . the widest deficit among advanced economies.” Letting sterling take the strain of economic adjustment is something that the British have done before. Between 1972 and 1976, the pound fell by 40% against the dollar. Between 1980 and 1985, it dropped 55%. And between 2007 and 2009, it fell 35%. Since it peaked in 2014, sterling has already dropped by over 20%. So don’t be surprised over the next few years to see sterling fall by another 20%-30% from current levels. But there is a problem in letting sterling slide in order to export recession and import economic stimulus. Other countries and currency blocs simultaneously want to do the same thing. Like the UK, the eurozone and China have an excess of debt and limited room for fiscal manoeuvre. They too want to see their currencies drop. And it is a simple impossibility for everybody to drop their currencies against everybody else.

Cormac Lucey is the Programme Director of the IMI Diploma in Business Finance. Cormac is also a Financial Services Consultant and Contractor who has previously worked with PricewaterhouseCoopers, Rabobank Frankfurt and the Department of Justice.

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Cormac Lucey

7th Mar 2018

Cormac Lucey is an IMI associate on the IMI Diploma in Business Finance.

21st Century Leadership: The Shifting River

Blockchain: Digitally Disrupting and Transforming Business Ecosystems

Only in the foothills of currency danger

After The Boom Comes The Bust

Isaac Newton and Bitcoin

The problem with all investments and, more pertinently, investors, is that judgements are not necessarily based on reason and value.

Falling off the Shoulder of Giants

The recent plunge in the global stock markets have given a reminder to all investors that ‘stocks may fall as well as rise’. It is a message that is seemingly forgotten every day and has been so for as long as investment has been in existence.

The problem with all investments and, more pertinently, investors, is that judgements are not necessarily based on reason and value. As we will see, one of the greatest minds in history didn’t learn that lesson.
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Bitcoin: What Goes Up

In 2010, you could buy Bitcoin for $0.05. In 2015, you could buy it for $220. At the end of last year, its price had crept up to almost $1,000. At the beginning of this year, the price reached $18,000.

The Bitcoin price graph displays the vertical take-off pattern normally seen towards the end of a financial bubble. The biggest gains can be made towards the end of an asset price bubble just when investing in the bubble is at its most dangerous.

The underlying features of the asset which is the object of a financial bubble almost don’t matter. Of far more importance is the presence of those human characteristics of greed (and wanting to get rich quickly) and fear (of missing out as friends and neighbours get rich while you’re left behind).
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The more things change, the more they stay the same

The South Sea Company was a London company was granted a British government monopoly to trade with South America. It was set up as a public-private partnership in 1711 to reduce the cost of national debt. The problem was that Spain controlled South America and there was therefore little realistic prospect that trade would take place. The company never generated any significant profit from its monopoly. That didn’t stop it becoming the object of a massive financial bubble.

The Swiss investment manager Marc Faber has prepared a wonderful graphic illustrating how the great scientist Isaac Newton lost his fortune investing in South Sea Company shares.

Against the backdrop of the sharp rise and fall of the company’s share price, Faber has marked Newton’s transactions: at the start of the bubble “Newton invests a bit; after seeing the value of his investment more than double “Newton exits happy”; as prices continue to rise “Newton’s friends get rich”; at a price double that where he sold “Newton re-enters with a lot”; and, finally, at a much lower price after the bubble had burst “Newton exits broke”.

You might forgive the great man on the grounds that he was a scientist with his head in the clouds but, throughout this time, Newton was a financial market insider in charge of the British Mint.

Cormac Lucey is an IMI associate on the IMI Diploma in Business Finance. Cormac is also a Financial Services Consultant and Contractor who has previously worked with PricewaterhouseCoopers, Rabobank Frankfurt and the Department of Justice.